Banks still dominate High Court cases involving blue-chip firms

Last year the banking sector saw the first shareholder class action in the UK

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High Court cases involving FTSE 100 companies were dominated by banks this year, highlighting the problems facing lenders like Lloyds Banking Group and Royal Bank of Scotland.

Of the 178 cases lodged in the High Court, 69, or 39 per cent, involved the UK’s five largest banks, which also include Barclays, HSBC and Standard Chartered, according to Thomson Reuters.

Overall, there were 81 cases involving companies in financial services, which has accounted for about half of all FTSE 100 High Court cases since the banking crisis.

“Five years after the height of the banking crisis we are still seeing banks and other financial institutions make up the lion’s share of big company litigation,” said Rachel Hopkinson, head of the Practical Law Dispute Resolution Service at Thomson Reuters.

“Although the sector’s share of all litigation has eased in the last year there is the risk of a second leg of disputes resulting from recently identified failings in the conduct at banks around market manipulation.”

Typical cases include disputes over whether a bank was within its rights to withdraw a financing facility from a customer, whether a client had breached their lending covenants before being asked to pay higher interest rates and fees, or whether a bank was within its rights to seize collateral from a debtor.

Last year the banking sector saw the first shareholder class action in the UK, relating to a rights issue by RBS in 2009.

“With the financial services sector still accounting for one in two of all cases involving FTSE 100 companies it shows that the sector faces a challenge not just from the regulators but also from claims from customers and shareholders through the court system,” Ms Hopkinson said.

Separately, Andrew Tyrie, chairman of the Commons Treasury Committee, has written to Barclays, HSBC, Lloyds, RBS and Santander after the committee heard evidence last month that figures published by banks may be understating the level of fraud in the banking system.